ABC of ERP... in Digital India

Introduction

In digital space, more and more organizations are looking greater benefits and vertical and horizontal growth by adopting ERP, but the key challenges are still there, which are not technological limitations as they grown manifold and are ready to deliver services at the door-step of the end-users.

The challenges today lies with ERP Fitment, Communication, User’s Acceptance coupled with setting realistic organization goals are the key to Successful Rollout of ERP in Modern Era.

Enterprise resource planning (ERP) system has been one of the most popular business management systems, providing benefits of real-time capabilities and seamless communication for business in large organizations. However, not all ERP implementations have been successful.

Since ERP implementation affects entire organizations such as process, people, and culture, there are a number of challenges that companies may encounter in implementing ERP systems.

In spite of ERP’s significant growth from the late 1990s to the present day, there are a number of challenges that companies may encounter when implementing ERP in earlier days. As ERP matures over a period of time, the number challenges the organization faced has been greatly reduced to three broad areas like ERP fitment, User Acceptance, Communication.

ADOPTION:

ERP ERP adoption is buzz word and the organization looks it as heroic tasks over a period of time and its implementation across the enterprise. However, the well-defined organization with the clear set of processes, the adoption rate of ERP is much better than the organization with less process oriented.

75% of the ERP project failures attributed to the facts that the choosing an evaluation of the right ERP for its internal use than the product itself. In sizeable organizations, they seem to be disregarding ERP systems as the answer to their business complexity.

Unexpectedly, SMEs disregard financial constraints as the main cause for ERP system non-adoption, suggesting structural and organizational reasons as major ones. This is directly different from what is observed in large organizations where the first reason for not adopting an ERP system is organizational.

Moreover, the decision process regarding the adoption of ERP systems within SMEs is still more affected by factors influencing the outside the organization and then business-related factors, contrary to large companies that are more interested in managing process integration and data redundancy/inconsistency through ERP implementation.

Some are attributed to high cost and lack of support from senior management. Adoption in the current digital space is much better than in the 1990s as today we have multiple options in ERP products space and technology space. As of date, many options are available in the ERP space both in the productized, bespoke, open source, cloud versions.

BENEFITS: ERP

The likely benefits expected from ERP Cost can be seen depending on the industry and the faster adoption of the organization. In FMCG industry, On-line information of item wise stocks availability vs. Ordering items and forecasting of sales based on planning computations, customer base, segmentation of customers etc are the keys to the success of the organization.

In manufacturing industries, the synchronization between resources like manpower and materials, planning the materials versus the market requirements etc. Further dispatches from factory would be complete in quality, quantity & sequence resulting to re-work, re-order, re-sequenced and the centralized procurement of material like Fabric would bring down the cost and then continuous monitoring of slow-moving stock and defective stocks etc are the key parameters to be monitored and this would help in disposing of stocks & quick realization of money.

In marketing organisation, ERP facilitates sales process & customers in his territory faster rate and All India view of sales figures (product wise, Project wise, sales type wise, region etc) and Increase Conversion Rate, Reduce Cost of sales, Reduce Lost Sales, avoid late delivery penalties. Track Inventory and material from the requirement to delivery.

CHALLENGES: ERP Product Fitment

In late 2000 to till today, there are a lot of enterprise resource planning products in the market both branded; unbranded, open source & cloud-based ERP etc but all are not the right fit everywhere.

The small and medium segment has many failure stories and causes of dissatisfaction over successful implementation across these business segments. There are two schools of thought prevailing in this segment of industry ie One school of thought is for big investment for ERP and the other school of thought is not to invest in enterprise resource planning.

Moreover, as the competition is building up in the market, more and more customization requirements are also increasing and hence need to build flexible systems and processes in order to meet the customer requirements. Most of ERP systems present on the market offer a large number of features, especially in the case of Open source solutions.

However, as the ERP works as a mirror of your business, some customization might still be required as each company has a specific organisation and business model. Before deciding to customise some features or to develop a new module, makes sure with your ERP consultants that these features will really bring some value in your business, in order to not develop an expensive module that your employee will never use.

CHALLENGES: User Acceptance

Many companies have realized impressive benefits by implementing enterprise resource planning systems; however, the success of an ERP implementation is influenced by a great many factors. User involvement is one of the most cited, critical success factors in ERP implementation projects.

Generally, when users are involved in the implementation, the end result will deliver a better fit in relation to business processes and acceptance between the end users and the ERP System. In technical terms, the preparation comes in the form of user acceptance testing (UAT).

User acceptance testing is often used as a project milestone for contractual reasons; completing UAT signifies that the solution has reached an acceptable level of stability and this, in turn, can be linked with the issue of who is going to pay for fixing defects. UAT is actually far more important than that — it is your key to project success. It’s important to iron out the issues in a safe environment first, and for an enterprise resource planning implementation, the safe environment is UAT.

Every issue that is found during UAT is one less issue that will need to be solved after go live, and the thing about go live issues is they can be really dangerous. When an issue occurs in a production system in a go-live environment, it needs to be fixed quickly, and there is typically a great deal of stress associated with the issue. Being hurried in a stressful environment does not make for good programming and it certainly doesn’t allow for well thought out design.

CHALLENGES: Communication

Effective implementation of enterprise resource planning solutions requires good communication, which is essential to the organization. This need to be explained to the different stakeholders of the project why the old system is not efficient anymore, and what they will get from the new system.

The main idea behind communication is to avoid the creation of a group of resistant’s to the ERP project, in order to mitigate the risk. Two main risks perceived by end users need to be erased: first the risk the ERP will do the work done by the end user. You need to be clear that the enterprise resource planning is not integrated to do the job of employees but to help them to be more productive by simplifying the processes.

Secondly, some employees can be afraid to not have the abilities to work on this new system because of their limited computer literacy. Hence, need to explain to them that training will be done to help them to understand the new ERP system. Building confidence among all stakeholders through communication channel all along the project, to be sure people will be familiarized with the solution and will support its integration.

Setting realistic expectations requires an investment of time, resources and money, but the payoff occurs when your organization achieves all its expected benefits and experiences ERP success. ERP solutions are often seen as the magic stick which will solve all the problems of a company and will enhance all processes instantly.

But the reality is a bit different; a high percentage of enterprise resource planning implementation project fails because they have not been carefully thought upstream in terms of organisational benefits, budget, and timelines of the project.

However, one of the most important aspect to ensure the success of an enterprise resource planning deployment project is the ability to set realistic expectations. Having realistic expectations will allow the company of any size, an ERP is an achievable project, which respects the business objectives in the short time to long-time.

CONCLUSION

Though the adoption of enterprise resource planning is gradually gaining momentum, the failure rate seems to be equally comparable to the challenges stated in this article. Hence organization which is looking for adoption of ERP for achieving organization level benefits, need to evaluate all the challenges before going for selection and finalization of enterprise resource planning for the implementation.

Today there are no ERP product limitations or technological limitations, but fitment of the product, users acceptability and communication to all stakeholders in the project are to be addressed by the senior management for effective enterprise resource planning rollout irrespective of the organization size/industry vertical.

Authored By by Shri Ramajeyam Sekar,
MCA., MPhil., IACSIT, IAENG, MCP, DBA and currently working as PROJECT
DIRECTOR of CMS Computers Ltd, Chennai implementing the Integrated
Dairy Project Management Solution for AAVIN @ TamilNadu and prior to
this worked as Head (Delivery) with In-space Technology Pvt Ltc, Chennai.